CONSULTING
AGREEMENT




Consulting
Agreement (this “Agreement”), dated as of March 31, 2009 (the "Effective Date")
between Applied Energetics, Inc. (the "Company") and Stephen W. McCahon
(“Consultant”).




1.           Consultant's
Services.  The Company
hereby engages Consultant to provide to the Company, and Consultant agrees to
provide to the Company under the terms of this Agreement, business and technical
consulting services as requested by the Company from time to time (hereinafter
the "Services") during the Term (defined below).  During the Term,
Consultant shall be available to provide up to forty (40) hours per week of
Services as reasonably requested by, and upon reasonable notice
from,  the Company.  The Services shall be performed under
the direct supervision of the Board of Directors and the Chief Executive Officer
or such other officer as appointed by the Board of directors and shall be
performed at such times and places and in such manner (whether by conference,
telephone, electronic communication or otherwise) as the Company shall
reasonably determine (subject to reasonable accommodation as to scheduling and
location).  Consultant shall make reasonable efforts to meet with the
Company’s employees, directors and customers as reasonably requested by the
Company.  It is understood and agreed that while serving as a
consultant to the Company hereunder, Consultant may engage in any business or
employment activities in any field either for his own account or for the account
of others subject to the provisions of Section 3 below.




2.           Term;
Compensation; Reimbursement of Expenses.  Consultant shall
render the Services during the period from the Effective Date through March 31,
2010 (the “Term”); provided that the Term shall automatically extend on a
monthly basis, unless terminated in accordance with Section 4
below.  In exchange for the performance of the Services, and
specifically for the covenants contained in Section 3 hereof, the Company shall
pay Consultant (in addition to the payments set forth in Section 1 hereof), a
fee at the rate of $18,750 per month, payable on or prior to the fifth (5th)
business day of the following month.  The Company shall report his
earnings at year-end on a Form 1099.  In addition, the Company will
reimburse Consultant for business expenses, to the extent such expenses relate
to Consultant’s performance of the Services (and, for any expense in excess of
$1,000, as pre-approved in writing by the Company), he actually incurs in the
performance of the Services hereunder.




3.           Confidentiality;
Noncompetition; nonsolicitation; nondisparagement.




3.1.                 The
Company and Consultant acknowledge that the Services to be performed by
Consultant under this Agreement are unique and extraordinary and, as a result of
such engagement, Consultant shall be in possession of confidential information
relating to the business practices of the Company.  The term
“confidential information” shall mean any and all information (oral and written)
relating to the Company or any of its affiliates, or any of their respective
activities, as well as any distributors, vendors, suppliers, customers or other
third party of which Consultant shall possess in connection with performing the
Services and his prior employment with the Company, other than such information
which (i) can be shown by Consultant to be in the public domain (such
information not being deemed to be in the public domain merely because it is
embraced by more general information which is in the public domain) other than
as the result of breach of the provisions of this Section 3 or (ii) Consultant
is required to disclose under any applicable laws, regulations or directives of
any government agency, tribunal or authority having jurisdiction in the matter
or under subpoena or other process of law.  Consultant shall not,
during the Term and thereafter, except as may be required in the course of the
performance of his duties hereunder, directly or indirectly, use, communicate,
disclose or disseminate to any person, firm or corporation any confidential
information regarding the clients, customers or business practices of the
Company acquired by Consultant, without the prior written consent of the
Company; provided, however, that
Consultant understands that Consultant shall be prohibited from misappropriating
any trade secret at any time during or after the Term.







3.2.                 Upon
the termination of Services under this Agreement for any reason whatsoever, all
documents, records, notebooks, equipment, price lists, specifications, programs,
customer and prospective customer lists and other materials which refer or
relate to any aspect of the business of the Company which are in the possession
of Consultant, including all copies thereof, shall be promptly returned to the
Company.




3.3.                 Consultant
hereby agrees that he shall not, during the Term and for a period of two years
after the termination of Services under this Agreement, directly or indirectly,
within any county (or adjacent county) in any State within the United States or
territory outside of the United States in which the Company is engaged in
business during the Term, engage, have an interest in or render any services to
any business (whether as owner, manager, operator, licensor, licensee, lender,
partner, stockholder, joint venturer, employee, consultant, advisor or
otherwise), other than the Company, competitive with the Business (as defined
below).  The term “Business” means (i) laser guided energy
technologies, (ii) laser induced plasma channel technologies, (iii) counter-IED
technologies, (iv) high voltage laser technologies and (v) other laser
technologies as to which (solely in the use of clause (vi)) the Company is
specifically engaged in (including through research and development) as of the
date of this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent Consultant from (i) owning stock in a publicly traded corporation whose
activities compete with those of the Company’s, provided that such stock
holdings are not greater than two percent (2%) of such corporation, or (ii)
pursuing any business opportunities, either as a sole proprietorship, company,
corporation, partnership or other business enterprise, that is not competitive
with the Business.




3.4.                 Consultant
shall not, during the Term and for a period of two years after the termination
of Services under this Agreement, directly or indirectly, take any wrongful
action which constitutes an interference with or a disruption of any of the
Company’s business activities including, without limitation, the solicitations
of the Company’s customers, distributors or vendors in connection with any
activities or for any person or entity engaged in or seeking to engage in
business competitive with the Business.




3.5.                 Consultant
hereby acknowledges and agrees that he is prohibited from, during the Term and
for a period of two years after the termination of Services under this
Agreement, (i) directly or indirectly, enticing or soliciting the hiring of any
officer or employee of the Company or (ii) in any manner enticing, soliciting,
persuading or attempting to persuade any agent, lessor, lessee, licensor,
licensee or customer of the Company (but only those suppliers existing during
the time of Consultant’s preference of Services under this Agreement), to
discontinue or alter his, her or its relationship with the
Company.  In addition, if during the Term and for a period of two
years after the termination of Services under this Agreement Consultant hires
any person who is an officer or employee of the Company during such period,
Consultant shall provide the Company prompt written notice of such
hiring.


-2-




3.6.           (a)  Consultant
agrees that all processes, technologies and inventions (“Inventions”), including
new contributions, improvements, ideas and discoveries, whether patentable or
not, conceived, developed, invented or made by him during the Term shall belong
to the Company, provided that such Inventions were the product of Consultant’s
work with the Company or are conceived, developed, invented or made with the use
of the Company’s facilities or materials.  Consultant shall further:
(a) promptly disclose such Inventions to the Company; (b) assign to the Company,
without additional compensation, all patent and other rights to such Inventions
for the United States and foreign countries; (c) sign all papers necessary to
carry out the foregoing; and (d) give testimony in support of his
inventorship;




(b)             Consultant
shall promptly provide written notice of any Invention  that is
described in a patent application or is disclosed to third parties, directly or
indirectly, by Consultant within two (2) years after the termination of his
Services; and




(c)             Consultant
agrees that he will not assert any rights to any Invention as having been made
or acquired by him prior to the date of this Agreement, except for Inventions,
if any, disclosed to the Company in writing prior to the date of this Agreement
or within fifteen (15) days from the date of this Agreement (it being understood
that none of the Inventions disclosed or to be disclosed are being used in the
Business).




3.7.                 The
Company shall be the sole owner of all products and proceeds of Consultant’s
services hereunder, including, but not limited to, all materials, ideas,
concepts, formats, suggestions, developments, arrangements, packages, programs
and other intellectual properties that Consultant may acquire, obtain, develop
or create in connection with and during the term of Consultant’s employment
hereunder, free and clear of any claims by Consultant (or anyone claiming under
Consultant) of any kind or character whatsoever (other than Consultant’s right
to receive payments hereunder).  Consultant shall, at the request of
the Company, execute such assignments, certificates or other instruments as the
Company may from time to time deem necessary or desirable to evidence,
establish, maintain, perfect, protect, enforce or defend its right, or title and
interest in or to any such properties.




3.8.                 At
no time during or after the Term shall Consultant, directly or indirectly,
disparage the commercial, business, professional, financial, or personal, as the
case may be, reputation of the Company or its officers or
directors.  At no time during or after the Term shall the Company or
its officers or directors, directly or indirectly, disparage the commercial,
business, professional, financial, or personal, as the case may be, reputation
of Consultant.




3.9.                 Without
intending to limit the remedies available to the Company, Consultant
acknowledges that a breach of any of the covenants contained in this Section 3
may result in material and irreparable injury to the Company, or its affiliates
or subsidiaries, for which there is no adequate remedy at law, that it will not
be possible to measure damages for such injuries precisely and that, in the
event of such a breach or threat the Company shall be entitled to seek a
temporary restraining order and/or a preliminary or permanent injunction
restraining Consultant from engaging in activities prohibited by this Section 3
or such other relief as may be required specifically to enforce any of the
covenants in this Section 3.  Consultant hereby acknowledges and
agrees that the type and periods of restrictions imposed in this Section 3 are
fair and reasonable and are reasonably required for the protection of the
Company’s confidential information and the goodwill associated with the business
of the Company.  Further, Consultant acknowledges and agrees that the
restrictions imposed in this Section 3 will not prevent him from obtaining
suitable employment after his employment with Consultant ceases or from earning
a livelihood.  If for any reason it is held that the restrictions
under this Section 3 are not reasonable or that consideration therefor is
inadequate, such restrictions shall be interpreted or modified to include as
much of the duration and scope identified in this Section as will render such
restrictions valid and enforceable.


-3-




4.           Termination.   The
performance of Services by Consultant under Section 3 hereunder may be
terminated by the Company or Consultant after the initial 12-month Term upon
thirty (30) days notice to the Company.  In the event of any such
termination, Consultant shall be entitled to no further benefits other than
payment of amounts owed to Consultant through the date of such termination (pro
rata for the month in which the termination occurs) and any such payments shall
be made within five (5) business days after termination of this
Agreement.  Termination of the performance of Services by Consultant
pursuant to this Section 6 shall not terminate or otherwise effect Consultant’s
obligations under Section 3 of this Agreement.




5.           Independent
Contractor.  It is expressly
understood and agreed that during the term of this Agreement, Consultant's
relationship to the Company will be that of an independent contractor and that
neither this Agreement nor the services to be rendered hereunder shall for any
purpose whatsoever or in any way or manner create, expressly or by implication,
any employer-employee relationship, partnership, joint venture or other
relationship with the Company other than that of independent parties contracting
with each other solely for the purpose of carrying out the provisions of the
Agreement.  Consultant is not authorized to bind the Company, or to
incur any obligation or liability on behalf of the Company, except as expressly
authorized by the Company in writing.  Consultant understands and
agrees that the work to be performed is not covered under the unemployment
compensation laws and that the work to be performed is not intended to be
covered by applicable worker's compensation laws.




6.           Miscellaneous.




(a)           This
Agreement contains, and is intended as, a complete statement of all of the terms
of the arrangement between the parties with respect to its subject matter and
supersedes all previous negotiations, promises, agreements and understandings
with respect to those matters, whether oral or written.




(b)           No
provision of this Agreement shall be waived, amended, modified, superceded,
canceled, terminated, renewed or extended except in a written instrument signed
by the party against whom any of the foregoing actions is
asserted.  Any waiver shall be limited to the particular instance and
for the particular purpose when and for which it is given.




(c)           Consultant
hereby agrees that each provision herein shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall in no way
impair the enforceability of any of the other clauses of the
Agreement.  Moreover, if one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to scope,
activity, subject or otherwise so as to be unenforceable at law, such provision
or provisions shall be construed by the appropriate judicial body by limiting or
reducing it or them, so as to be enforceable to the maximum extent compatible
with the applicable law as it shall then appear.  Consultant hereby
further agrees that the language of all parts of this Agreement shall in all
cases be construed as a whole according to its fair meaning and not strictly for
or against either of the parties.


-4-


(d)  This
Agreement, the Services to be performed and all rights hereunder are unique to
Consultant and may not be performed on Consultant’s behalf by any person other
than Consultant and may not be transferred or assigned by Consultant or by the
Company at any time; provided, however, that Consultant may assign this
Agreement to a corporation or limited liability company wholly-owned by him (a
“Successor”), provided, further that (i) the Consultant shall remain liable for
all of its obligations under this Agreement, (ii) the Successor shall agree in
writing to be bound by the terms of this Agreement and (iii) Successor shall
cause Stephen McCahon to perform all Services required to be performed by
Consultant under this Agreement
  (e)  This
Agreement shall be construed and enforced in accordance with the internal laws
of the State of Arizona without reference to its conflicts of laws
provisions.
  IN
WITNESS WHEREOF, the parties hereby execute this Agreement on the date first
written above.


APPLIED
      ENERGETICS, INC.By:
                  /s/ Kenneth
      M. WallaceName: Kenneth
      M. Wallace
                    Title: Chief
      Financial OfficerBy:
                  /s/
      Stephen A McCahonStephen
      A. McCahon, individually


-5-